The home-buying market could be permanently downsized post-recession, and home-ownership levels could continue to fall.
The warning comes from the Intermediary Mortgage Lenders Association, which says the Government must urgently review its policies.
Transactions are still around at least 40% below those of their peak, and according to the Bank of England there was a 4.3% fall in the mortgage market during the first three months of this year.
IMLA’s new report, Rebalancing the Housing and Mortgage Markets – Critical Issues, looks at changes in the housing and mortgage markets following the financial downturn.
It says that just one third of younger households – those aged between 25 and 34 – are likely to be owner occupiers, just over half the number in 1993.
The report by Professor Steve Wilcox at the University of York’s Centre for Housing Policy, calls for the Government to develop a long-term vision for home ownership.
?Peter Williams, executive director for IMLA, said: “In the wake of the recession there has been a growing appetite for rebuilding the housing and mortgage markets in a way that is sustainable through the economic cycle.
“Limiting the risk for borrowers and lenders is of course a vital part of this process, but there are wider implications for households, the market and the wider economy that simply cannot be ignored.
“Generations of Britons have been raised with the ambition of owning their own homes, which has become a key part of our national identity. But this goal threatens to disappear from view unless we consider what kind of market we want to create for the future and what can be achieved within the scope of mortgage regulations and available finance.
“There is a clear onus on lenders to ensure mortgage products are simpler to understand and provide customers with a long-term service that caters to their evolving needs.
“Beyond that, we urge the Government to recognise and act on these critical issues that will shape the future of the market, so we are not left dealing with unintended consequences further down the line.”